A MAJOR influx of foreign capital lured by Hongkong's roaring stock market and the overwhelming oversubscription of China-linked Denway International Holdings played major roles in boosting the Hongkong dollar M3 money supply by 5.2 per cent in March, economist say. Statistics released yesterday by the Hongkong Monetary Authority showed M3, the broadest measure of money supply jumped to $809.7 billion from $769.8 billion in February. The year-on-year increase was 22.4 per cent. Barclays de Zoete Wedd economist Catherine Chou said growing US interest in the bullish stock market and increasing investment in China saw a major amount of capital move into Hongkong. Denway, which hit the market in February, was more than 400 times oversubscribed. This tied up $200 billion in funds to raise just over $400 million. Hongkong dollar deposits with authorised institutions in March climbed 5.7 per cent, representing a significant climb over 1.3 per cent and 1.2 per cent increases in January and February, respectively. Ms Chou said this was primarily due to the fact that many people in Hongkong who had offshore, high-interest savings continued to pull their money back into the territory after the volatile European Exchange Rate Mechanism crisis in September. ''Foreign currency savings fell out of favour so people tended to fall back on local deposits,'' she said, adding that the continued weakness of the US dollar could see this trend reversed again. Ms Chou said the growth of M1 - coins and notes in circulation and money held in bank accounts - indicated people were willing to hold their savings in quasi-cash alternatives to take advantage of potential investment opportunities. The Monetary Authority said Hongkong dollar M1 rose 6.4 per cent in March to $142.6 billion from $134 billion in February. The year-on-year jump was 23.4 per cent. M2, which is M1 plus savings and term deposits and negotiable certificates of deposit issued by local banks, edged up 6.4 per cent in March from February and 23.4 per cent year-on-year. Ms Chou said it was difficult to determine if the increase in money supply and deposits would have an impact on inflation, which fell to its lowest level in five years in March at 7.8 per cent. Government statistics showed that among deposits, demand deposits were up 11 per cent, savings deposits 2.4 per cent and time deposits up 6.7 per cent. Year-on-year, total deposits climbed 22.8 per cent. Total loans during the first quarter for use in Hongkong exceeded the rate of inflation by a wide margin, with a 14.6 per cent increase to $967.7 billion compared with $909.9 million during the same period in 1992. Loans to purchase residential property other than flats in Home Ownership or Private Sector Participation schemes edged up a modest one per cent to $204.7 billion from $202.6 billion. This followed increases of 2.1 per cent and 1.1 per cent in the preceding two quarters. Loans to the shrinking manufacturing sector were up 9.5 per cent to $69.7 billion from $63.7 billion while loans to financial concerns, excluding funds advanced to authorised institutions, were up 9.4 per cent to $137 billion from $125.1 billion. The growing wholesale and retail trade had borrowings rising 5.5 per cent to $92.9 billion from $88.1 billion while the building, construction, property development and investment sector borrowing edged up 3.2 per cent to $146.7 billion from $142.1 billion. Ms Chou said loans were not expected to show significant increases until later this year because the Government was sticking to its policy of maintaining the mortgage ceiling at 70 per cent of the purchase price. There were rumours this week, however, that the figure could be raised to 80 per cent, which sent property stocks soaring.